By Chad Umble LNP, Lancaster, Pa.
During her 10 years in the banking industry, Deb Flores learned what it takes to get a small business loan.
And she also knows what often prevents small businesses from getting the funding they need to grow.
In her previous job as a credit union branch manager, the 38-year-old said she often had to turn away entrepreneurs who didn't have a good credit score, the required accounting records or enough years in business.
But in her new job as lending manager at ASSETS Lancaster, Flores is rolling out the welcome mat for the kind of borrowers she previously had to turn away.
"We're basically saying, "Hey, we're here. We can lend you money, we're willing to take a risk on you,'" Flores said.
In her new position, Flores is in charge of publicizing and growing the microloan program, which is modeled after successful international programs.
Lancaster-based ASSETS wrapped up its first yearlong lending circle in March. The lending circle consisted of nine small business owners who got one-year loans for $1,200 or $3,600 and then meet monthly for technical support and networking.
Graduates of that first lending circle are eligible for a loan of up to $5,000 in a new lending circle set to begin in June.
Meanwhile, ASSETS, as it looks to expand the program, is continuing to meet with borrowers who were part of a lending circle that began in December.
Flores talked about microlending, ASSETS and her new job during a recent interview in her office.
What is microlending? It is a new concept (in Lancaster), but it's been done for many years.
It was in the early 1970s when Muhammad Yunus, an economics professor in Bangladesh, realized that traditional lending models weren't working in his country. Basically only the rich had access to capital.
Yunus came up with the concept of microlending. He implemented it, and it became so large that he eventually founded his own bank, Grameen Bank, which now lends millions of dollars to people.
What are the loan amounts in the ASSETS program? For someone who is going through the circle for the first time, typically the loan is $1,200.
Once that loan is paid off and he or she decides to do it again, the person has access for up to $5,000.
It is a steppingstone so that once the borrower needs that larger capital, he or she is ready to go to the traditional banks and isn't considered a risky borrower anymore.
The target of the loans ASSETS' focus is to serve the underrepresented populations in our community.
Those include people who have no collateral to offer, people who have poor credit history, people who have a language barrier, who lack business skills or are members of groups categorized as minorities, such as women, African-Americans and Latinos.
Those are the people that we want to serve, particularly in south Lancaster city, which has a higher poverty rate than in the rest of the city.
Why would business owners need to get a loan from ASSETS? We had a call from a gentleman who had tried to get a loan and was declined because of a poor credit history. This gentleman had a trucking business on the side and hadn't done it for less than a year. The credit union actually referred him to ASSETS.
Those are the type of scenarios we're looking for: people who have been declined by traditional banks because they have poor credit history, their business is too young or they lack financial statements.
What does it mean to become a part of the lending circle? It is them and potentially 10 other people who are also in the same situation. They're all business owners, so they get to know each other. They get to network and share their experience and create this bond.
What happens at the lending circle's monthly meetings? We're offering business skills and technical assistance. The group decides what they want that curriculum to look like.
It could be saving for retirement or creating financial statements. It could be social media, marketing or accounting basics. Sometimes we facilitate ourselves and sometimes we bring someone in.
We always cover understanding your credit score, because that is often a big reason they are in the group.
Can a small loan really help to grow someone's business? Monetarily, there's not a whole lot you can do with $1,200. However, it's everything that comes with that. It's preparing people to get access to more capital, which is where you have the potential to truly make a difference.
But without having gone through the ASSETS program, it would be very difficult to almost impossible to get that. Could someone keep getting microloans from ASSETS?
We don't want ASSETS to be their main bank. The idea is that once they go through that second round, they're ready to step out and go to a traditional institution. We don't want them in and out of circles.
What is one of your goals for the program? I wish I knew about this program when I was a branch manager because I can't tell you how many people were turned away and I didn't know where to refer them.
So that's my goal. I want managers and people making those decisions to understand there are other alternatives out there, like ASSETS.
Loan amounts: - Round one: $1,200 or $3,600 - Round two: up to $5,000
Loan term: 1 year Interest rate: 9 percent